US jobless claims fall to lowest level in 4 years

People pass a military jet while attending a job fair for veterans, Wednesday, March 28, 2012 at the Intrepid Sea, Air and Space Museum in New York. The number of people seeking U.S. unemployment benefits dropped last week, the latest evidence that the job market is strengthening.
(AP Photo/Mark Lennihan)

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WASHINGTON—The number of people seeking U.S. unemployment benefits dropped last week to the lowest level in four years, adding to evidence that the job market is strengthening.

Applications for weekly unemployment benefits fell by 5,000 to a seasonally adjusted 359,000, the Labor Department said Thursday. That's the fewest applicants since April 2008. The four-week average, a less volatile measure, declined to 365,000 -- the fewest for that measure since May 2008.

When unemployment benefit applications drop consistently below 375,000, it usually signals that hiring is strong enough to lower the unemployment rate. The decline has coincided with the best three months of hiring in two years.

The department made annual revisions to the past five years of data, which increased the number of applications in recent months and showed a slower decline. Still, even after the revisions, applications have fallen roughly 12 percent over the past six months.

Most economists still expect another strong month of hiring in March.

"The trend remains unambiguously downwards," said Ian Shepherdson, an economist at High Frequency Economics. "We think the rate of decline ... is slowing ... but they are still consistent with robust, sustained payroll gains."

Separately, the U.S. economy expanded at a solid pace in the final three months of last year, but growth is expected to slow in the current quarter.

The economy grew at annual rate of 3 percent in the fourth quarter, the Commerce Department said. But economists forecast it likely dipped below 2 percent in the current quarter.

Businesses have been restocking their shelves at a slower pace and shipping fewer long-lasting manufactured goods. In addition, Europe's debt crisis and slower growth in Asia have reduced demand for U.S. exports.

Stronger hiring in the first two months of the year probably hasn't offset those weaknesses. That's because Americans' pay has barely kept pace with inflation while gas prices have spiked. So consumer spending, which accounts for 70 percent of economic activity, probably hasn't increased much from the end of last year.

Most economists expect growth to pick up later this year, as more hiring lifts the economy.

From December through February, employers added an average of 245,000 jobs per month. That has pushed down the unemployment rate to 8.3 percent, the lowest in three years.

Companies are hiring more workers because the economy is picking up. The economy grew at an annual rate of 3 percent in the final three months of last year. That was better than the 1.8 percent rate in the previous quarter.

The number of people receiving unemployment benefits also fell. More than 7.1 million laid-off workers received unemployment aid in the week ended March 10, the latest data available. That's about 130,000 lower than the previous week.

There are other signs the economy is steadily recovering. Consumers remained confident in March, even as gas prices jumped.

And the battered housing market is showing small signs of improvement. January and February comprised the best winter for sales of previously occupied homes in five years, according to the National Association of Realtors.

One concern is that rising gas prices will force consumers to cut back on discretionary spending. That could weigh on economic growth and slow hiring. The Federal Reserve says it expects oil and gas prices to temporarily boost inflation but predicts that longer-term inflation should remain stable.

The job market still has a ways to go to fully recover from the Great Recession. More than 12.8 million people remain unemployed and the economy still has 5 million fewer jobs than before the downturn.

But the more robust job market has caused some so-called "discouraged workers" to start looking again. The work force rose by nearly a half-million in February.